Americans worried about their incomes as they struggled to find work in September, holding consumer confidence near 2-1/2 year lows and pointing to weak spending in the months ahead.
Other reports on Tuesday on regional manufacturing and services showed some improvement this month, and house prices stabilized in July, giving hope for slow growth to continue as long as Europe's debt crisis does not escalate.
But depressed sentiment is holding back recovery. The Conference Board's index of consumer attitudes was little changed at 45.4 this month from 45.2 in August, and below economists' expectations for a rise to 46.0.
The message is stagnation, said Pierre Ellis, senior economist at Decision Economics in New York.
Ryan Wang, U.S. economist at HSBC, said stagnant consumer confidence may lead to spending restraint by households in the remainder of this year.
Poor labor market conditions are weighing heavily on sentiment, he said in a research note.
The steep stock market sell-off, political bickering in Washington over budget policy and a worsening debt crisis in Europe have eroded confidence, viewed as a key gauge of consumer health.
Hope that Europe would act to beef up a rescue fund lifted U.S. stocks on Tuesday and pushed government debt prices lower, while the dollar lost ground to the euro.
Increased economic uncertainty also hit confidence among small U.S. businesses. Vistage International said its confidence index, which surveys 1,700 chief executives, fell to a two-year low in the third quarter of 83.5 from a reading of 92.9 in the second quarter.
But there were glimmers of hope for the economy, with other data showing manufacturing activity in the central Atlantic region contracted at slower pace this month.
The Richmond Federal Reserve's manufacturing index improved to -6 from -10 in August. Separately, activity in the Texas services sector grew solidly this month. The Dallas Fed service sector revenues index rose to 14.1 from 3.2 in August.
There were also signs of stability in the housing market, with the S&P/Case Shiller composite index of single-family homes in 20 metropolitan areas unchanged in July on a seasonally adjusted basis.
Unadjusted prices in the 20 cities rose 0.9 percent.
I don't think domestic economic fundamentals, objectively evaluated, are that ominous themselves to push us into another recession, said Anthony Karydakis, chief economist at Commerzbank in New York.
The main risk is an exogenous event, like the one that is brewing in the background for sometime now with the euro zone debt crisis.
However, a recovery in the housing market remains a long way off as the sector struggles under the weight of an oversupply of unsold homes and households battle a 9.1 percent unemployment rate.
In a sign that people were struggling to find employment, the jobs-hard-to-get index in the Conference Board survey rose to 50.0, the highest level since May 1983, from 48.5 the previous month.
The labor market differential -- the percent reporting jobs plentiful less the percent reporting jobs hard-to-get widened out from -43.7 to -44.5 in September.
It's a bad sign for September payrolls. It's consistent with what we saw in the trend in jobless claims, which have risen also in recent weeks, said Daniel Silver, an economist at JPMorgan in New York.
The economy failed to add jobs in August for the first time in nearly a year. While September's nonfarm employment will be lifted by the return of 45,000 striking Verizon Communications workers, the underlying trend is expected to show weakness.
Despite the weakness, Walgreen Co, the largest U.S. drugstore chain, reported a healthy 6.5 percent rise in sales in its latest quarter. The number of people shopping at the drugstore chain rose and they spent more than earlier in the year.
(Additional reporting by Margaret Chadbourn; Editing by Andrea Ricci)